Authored by Nicci Britton and Michael McCarthy.
During August 2026, the Prudential Authority and the Financial Sector Conduct Authority invited interested stakeholders to provide comments to a draft Joint Standard setting out requirements relating to beneficial owners of financial institutions.
The draft Standard applies and imposes obligations on financial institutions and their beneficial owners.
The proposed definition of financial institutions in the draft Standard excludes institutions that are not accountable institutions under the Financial Intelligence Centre Act so that non-life insurers will not be affected. The draft Standard only applies to a financial institution that is an accountable institution.
The draft Standard excludes a limited number of natural persons from the proposed definition of beneficial owners. Natural persons who acquired an ownership interest in a financial institution through listed securities, directly or indirectly acquired an ownership interest in a financial institution as a member of a pension fund, an investor in a collective investment scheme, or through an employee share scheme as defined in section 95(1)(c) of the Companies Act, will not constitute beneficial owners.
Details are provided regarding what would constitute direct or indirect ultimate ownership or effective control as contemplated in the definition of beneficial owner in section 159A of the Financial Sector Regulation Act. Direct ultimate ownership refers to a natural person who holds 5% or more ownership in such financial institution, which is an irrationally low threshold for “control”.
The ability to exercise direct effective control of a financial institution refer to a natural person who has the ability to exercise or control the exercise of 15% of voting rights, appoint or remove 15% of members of the governing body or otherwise materially influences the management of the financial institution, a key person or materially influence decisions relating to the financial institutions’ capital, assets or debts, amongst others.
Indirect effective control will exist where a natural person (alone or together with other persons), has the ability to materially influence another person who meets the direct ultimate ownership or direct effective control requirements above.
The draft Standard includes requirements to:
- Consider a proposed list of factors which if present, indicate that a beneficial owner may lack honesty and integrity. The Authorities may consider any other reasonable considerations that the Authorities deems relevant.
- Assess the honesty and integrity of a beneficial owner as soon as reasonably possible after a beneficial owner is identified, and on an ongoing basis (at least every 2 years).
- Identify, obtain relevant information on, and verify beneficial owners, and record appropriate details in a repository which must be kept accurate and up to date. The exact details that should be recorded in this beneficial owner repository are not stated.
- When applying for a licence or authorisation in terms of a financial sector law, provide the Authorities with details of all the applicant’s beneficial owners. Once a licence has been granted, the financial institution must notify the Authorities of a new beneficial owner within 30 calendar days of it identifying the new beneficial owner, and within 30 calendar days if a beneficial owner ceases to be a beneficial owner.
There will be a transitional period of 6 months after the date of publication of the final standard before financial institutions have to comply with the above requirements.
The Authorities “envisage that the draft Joint Standard will contribute to combating financial crime in a substantial manner, to the benefit of South Africa as a whole” and “…has the potential of building trust in the financial system, both from a local and an international perspective, thereby mitigating systemic issues and aligning South Africa to international standards..”, and is another reaction to grey-listing risks. The proposals in the draft Standard will however increase the compliance costs and administration for the defined financial institutions and will lead to more penalties being extracted from financial institutions.
The Authorities have requested financial institutions to provide input – both qualitative and quantitative – to the expected impact through the public consultation process, to the extent possible.
Submissions on the draft Standard must be submitted in writing, using the submission template on or before 25 September 2026. It is important financial institutions do so and demonstrate the extent of the burden on them if implemented.
Joint Notice 1 of 2026 - Draft Joint Standard requirements pertaining to beneficial owners